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At NetSuiteInc.’s (NYSE: N) SuiteCloudchannel conference in San Francisco I learned that Microsoft Corp. (NASDAQ: MSFT) offered its channel partners an US$850spiff every time they switched a NetSuite user to Dynamics GP. That’s asignificant margin boost, especially if you are aggressively pursuing newbusiness opportunities anyway.

Now, this spiff is only available to U.S.-basedchannel partners and I wasn’t able to find out if it crossed over into Canadaor not. But my source thinks it’s only in the States.

While NetSuite probably won’t say so, I wonder ifthis direct attack to its install base led to the SP 100 program, which payschannel partners 100 per cent margins on first year license sales.

Now 100 per cent margins would get most people’sattention, but NetSuite’s margins were already great at 50 per cent on firstyear sales. In the second and third year partners get 30 per cent each, respectively.By adding 100 per cent on year one it basically gives NetSuite partners anextra 16 percentage points of margin over three year deals with customers. TheSP 100 program helps partners with business sustainability and profitability.

This move by Microsoft’s channel team sort ofvalidates the momentum of cloud computing in the market place. But I would liketo know what does it say for Microsoft‘s cloud readiness? Over the years I cansafely say that Microsoft does channel readiness better than any other vendorin the industry. And, considering Microsoft has hundreds and thousands ofpartners, that’s quite an achievement.

But this spiff move looks to be desperate, in myopinion.

When you compare Dynamics GP with NetSuite considerthis: Dynamics GP is loaded on a server and that server is located somewhere.It might be on-premise at the customer site or hosted someplace else, but it’son a server. Does it get upgraded automatically? That’s a question that manycustomers are asking today. Are those updates or hosting services somethingthat a customer must pay for each year? Can that system work and provide dataon a mobile device?

NetSuite has thrown out the question: Is Dynamics GPreally cloud computing?

I think these are fair questions that channelpartners must have an answer for today more any other time in history. Today,IT decision-makers don’t have a lot of money to burn. The money they do have isprecious and needs to be spent wisely and must provide excellent return oninvestment.

To be fair to Microsoft, they’ve clearly outlined theirSoftware+Services strategy to the channel. They do have many legacy customerswho might not be comfortable with SaaS or the cloud. They and their channelpartners have to take care of their needs. It’s a lot easier for NetSuite,since they’re young in the market place, to go full force into the cloud.

The one thing they’ve proven is that the momentumof cloud computing is too far along to stop. For a channel partner, this can bea scary situation and staying on the fence may not be the best optionavailable.